John Malone can wait out Altice’s $25 bln problem

Liberty Broadband

27/02/2024 17:37

(The author is a Reuters Breakingviews columnist. The opinions
expressed are their own.)
       NEW YORK, Feb 27 (Reuters Breakingviews) - Cable cowboy
John Malone has plenty of time to deal with his European
counterpart Patrick Drahi. Charter Communications  CHTR.O , the
$42 billion company backed by Malone’s Liberty Broadband
 LBRDA.O , is mulling a tie-up with Drahi’s Altice USA  ATUS.N ,
Bloomberg reported on Monday. Together, the duo would be
America’s largest broadband provider, reckons Bernstein –
valuable heft, especially when negotiating with entertainment
providers like Walt Disney  DIS.N . But the pitfalls are too
numerous.
    Altice was an M&A machine, purchasing Suddenlink and
Cablevision in 2015 for $9 billion and $18 billion,
respectively. A decade later, the company is burdened with $25
billion of leverage, or 7 times estimated EBITDA this year
according to LSEG. Its equity value of $1 billion is puny. A
deal would bump up Charter’s net debt ratio to nearly 5 times
estimated EBITDA this year, before figuring in any cost savings
and rising borrowing costs.
    Aggressive regulators would likely balk at overlap including
in New York. Plus, despite woes including shrinking EBITDA,
Altice’s enterprise is now valued at a richer multiple than
Charter. It makes little sense for Charter to pounce now when
its target faces an uncertain future. Waiting it out is the
better script to follow. (By Jennifer Saba)
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Graphic: Altice USA catches Charter's valuation    https://reut.rs/49PZiwB
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 (Editing by Jonathan Guilford and Aditya Sriwatsav)